Clark Cnty. Fire Dist. No. 5 & Am. Alt. Ins. Corp. v. Bullivant Houser Bailey P.C.

• Decision Date: 24 April 2014
• Docket Number: Nos. 42864–4–II, 43970–1–II.,s. 42864–4–II, 43970–1–II.
• Citation: 180 Wash.App. 689,324 P.3d 743
• Court: Washington Court of Appeals
• Parties: CLARK COUNTY FIRE DISTRICT NO. 5 and American Alternative Insurance Corporation, Appellants, v. BULLIVANT HOUSER BAILEY P.C. and Richard G. Matson, Respondent.

180 Wash.App. 689

324 P.3d 743

CLARK COUNTY FIRE DISTRICT NO. 5 and American Alternative Insurance Corporation, Appellants,

v.BULLIVANT HOUSER BAILEY P.C. and Richard G. Matson, Respondent.

Nos. 42864–4–II, 43970–1–II.

Court of Appeals of Washington,

Division 2.

April 24, 2014.

Michael Alexander Patterson, Daniel Paul Crowner, Patterson Buchanan Fobes Leitch PS, Seattle, WA, for Appellants and Other Parties.

Ray P. Cox, Richard R. Roland, Terrence J. Cullen, Forsberg & Umlauf PS, Seattle, WA, for Respondents.

MAXA, J.

¶ 1 Clark County Fire District No. 5 (Fire District) and its insurer American Alternative Insurance Corporation (AAIC) appeal the trial court's summary judgment dismissals of their legal negligence claims against the law firm Bullivant Houser Bailey PC and attorney Richard Matson (collectively, Matson). AAIC retained Matson to defend the Fire District and its employee, Martin James, in a gender discrimination and sexual harassment lawsuit. The trial of that lawsuit resulted in a jury verdict in excess of $3.2 million, which was increased to almost $4 million following the award of attorney fees. The Fire District and AAIC subsequently sued Matson, alleging that he was negligent in (1) failing to properly evaluate the case for settlement purposes, (2) mishandling various pre-trial matters, and (3) failing to object to improper statements in closing argument and failing to preserve for appeal the ability to challenge these statements. The trial court dismissed AAIC's claims based on its ruling that AAIC had no standing to sue because it was not Matson's client, and later dismissed the Fire District's negligence claims based on its ruling that Matson could not be liable for his judgment decisions.

¶ 2 Initially, we hold that under Stewart Title Guaranty Co. v. Sterling Savings Bank, 178 Wash.2d 561, 569–70, 311 P.3d 1 (2013), the trial court correctly ruled that AAIC did not have standing to sue Matson because his representation of the Fire District was not intended for AAIC's benefit. Therefore, we affirm the trial court's dismissal of AAIC's claims. With regard to the Fire District's legal negligence claims, all of the conduct at issue involved the exercise of Matson's professional judgment. We apply the “attorney judgment rule” to hold that (1) the Fire District could avoid summary judgment only if it came forward with sufficient evidence to show that Matson's judgment decisions were not within the range of reasonable alternatives from the perspective of a reasonable, careful and prudent attorney in Washington or that decisions themselves resulted from negligent conduct; and (2) the opinions of the Fire District's experts created questions of fact regarding most of its allegations. Accordingly, we affirm the trial court's grant of summary judgment dismissal of AAIC's claims, but we reverse the trial court's grant of summary judgment in favor of Matson on all the Fire District's claims except for the failure to object to the improper closing argument and the failure to file an appropriate motion in limine regarding the subject of the improper argument.

FACTS

Underlying Lawsuit

¶ 3 In February 2005, Sue Collins, Valerie Larwick, Kristy Mason, and Helen Hayden sued their supervisor (James) and employer (Fire District) for gender discrimination and sexual harassment in violation of the Washington Law Against Discrimination, chapter 49.60 RCW, and for related claims. Collins v. Clark County Fire Dist. No. 5, 155 Wash.App. 48, 62–63, 231 P.3d 1211 (2010).

¶ 4 James admitted to making sexually inappropriate and discriminatory comments while supervising employees, but he also testified that the plaintiffs had not told him that his remarks were inappropriate. Collins, 155 Wash.App. at 67, 231 P.3d 1211. From the Fire District's perspective, James's inappropriate comments and actions were part of ongoing banter between James and Collins, which Collins had initiated and encouraged. The Fire District disputed that James acted inappropriately with regard to the other plaintiffs and contended that they joined the lawsuit at Collins's urging.

Matson Case Evaluation and Mediation

¶ 5 In April 2005, AAIC retained Matson to defend its insureds (Fire District and James) in the Collins litigation. Apparently, there were lengthy delays in the discovery process. The plaintiffs did not depose James until February 8, 2007.

¶ 6 On February 26, 2007, Matson provided to AAIC a written evaluation of the plaintiffs' cases in preparation for a mediation. He valued each of the plaintiffs' claims based on past medical expenses, future medical expenses, back pay, front pay, prejudgment interest, general damages, and attorney fees. He also assigned a probability of prevailing for each plaintiff. Then Matson calculated a settlement value for each plaintiff based on the potential recoverable damages and the probability of prevailing. Matson evaluated the combined settlement value of the plaintiffs' claims at $370,000.¹ However, he warned that his approach was conservative, and that potentially recoverable damages could be higher at trial and the settlement values of each case could be as much as 50 percent higher. Matson also advised that exposure to adverse prevailing party attorney fees was a significant issue and could drive the settlement value of the case. Finally, Matson advised that the plaintiffs also could recover an amount that represents their increased income tax exposure.

¶ 7 On March 2, Matson provided a detailed pre-mediation statement to the mediator. Matson explained the facts from the plaintiffs' and defendants' perspectives and set forth his analysis regarding the strengths and weaknesses of each of the plaintiffs' claims.

¶ 8 On the eve of mediation, plaintiffs increased their settlement demand from $6.6 million to approximately $8.5 million. Consistent with Matson's evaluation of the case, AAIC's representative had $400,000 in settlement authority at the mediation. According to AAIC's representative, the mediator indicated that from her perspective, $1.8 million possibly would be a reasonable demand, but not $8 million, and that the average settlement value was approximately $85,000 per plaintiff. The mediator spoke to the plaintiffs but reported back that their demands remained firm. After a full day of mediation, AAIC decided not make a settlement offer in any amount. The AAIC representative stated at mediation that “if the plaintiffs want these kind of numbers a jury is going to have to give it to them.” Clerk's Papers (CP) at 546.

¶ 9 Matson did not file any dispositive motions or a motion to bifurcate the cases. Matson also did not make an offer of judgment.

Trial and Appeal

¶ 10 The case proceeded to trial. The jury returned a verdict in favor of all four plaintiffs, awarding them substantial judgments that totaled more than $3.2 million. Collins, 155 Wash.App. at 73–74, 231 P.3d 1211. The trial court also awarded the plaintiffs more than $750,000 in attorney fees and costs. Collins, 155 Wash.App. at 77–80, 231 P.3d 1211.

¶ 11 The Fire District moved for a new trial, arguing that during closing arguments plaintiffs' counsel deliberately interjected evidence of liability insurance and improperly encouraged the jury to award punitive damages to send a message to the Fire District. Collins, 155 Wash.App. at 74, 93–94, 231 P.3d 1211. The trial court denied the motion, ruling that “[t]aken together without objection, [the comment] is not so prejudicial to warrant the granting of a new trial.” Collins, 155 Wash.App. at 95, 231 P.3d 1211 (second alteration in original).

¶ 12 On appeal, we affirmed the trial court's denial of the Fire District's motion for a new trial in a published decision. Collins, 155 Wash.App. at 105, 231 P.3d 1211. With regard to the closing argument issue, we held that “[a]lthough such remarks were improper, we agree with the trial court that they were not so prejudicial that a timely instruction could not have cured any prejudicial effect.” ²Collins, 155 Wash.App. at 95, 231 P.3d 1211. This court also affirmed the trial court's attorney fees award and awarded $116,650.69 in attorney fees and costs on appeal to Collins and Larwick. Collins, 155 Wash.App. at 105, 231 P.3d 1211.

¶ 13 The supplemental judgment, for which AAIC indemnified its insureds, totaled more than $4.8 million (not including interest).

Allegation of Legal Negligence

¶ 14 AAIC and the Fire District sued Matson, alleging that he was negligent in failing to properly evaluate the case for settlement purposes, in mishandling various pre-trial matters, and in failing to object to allegedly improper closing arguments. The trial court dismissed AAIC from the lawsuit for lack of standing because AAIC was not Matson's client. The trial court certified its order under CR 54(b) to facilitate immediate appellate review, and AAIC appealed.

¶ 15 Thereafter, the trial court dismissed the Fire District's negligence claims against Matson on summary judgment, holding as a matter of law that Matson could not be liable for his judgment decisions. The Fire District appealed. We consolidated both appeals.

ANALYSIS

A. Standard of Review

¶ 16 We review a trial court's order granting summary judgment de novo. Loeffelholz v. Univ. of Wash., 175 Wash.2d 264, 271, 285 P.3d 854 (2012). “We review the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor.” Lakey v. Puget Sound Energy, Inc., 176 Wash.2d 909, 922, 296 P.3d 860 (2013). Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Loeffelholz, 175 Wash.2d at 271, 285 P.3d 854. “A genuine issue of material fact exists where reasonable minds could differ on the facts controlling the outcome of the litigation.” Ranger Ins. Co. v. Pierce County, 164 Wash.2d 545, 552, 192 P.3d 886 (2008). If reasonable minds can reach only one...